Results 301–350 of 377 found.
US Needs Sensible Debt Financing
Instead of imposing strict fiduciary rules on Wall Street, banks, investment houses, and financial advisors, the government should apply similar rules to the managers of the federal debt. This is particularly true because unlike the private sector – which faces tough market competition every day – the debt managers at the Treasury Department have a monopoly.
1 – The Panic of 2008 was not caused by tight monetary policy. 2 – Zero percent interest rate policy (ZIRP) and Quantitative Easing (QE) did not save the US or global economies. 3 – Monetary policy in the US is getting looser as the Fed hikes rates, and, 4 – negative interest rates in Japan and Europe are not working.
Rates Hikes on the Way
Mark your calendars for a rate hike on June 15. Although the Federal Reserve cut its estimate of the most likely path for interest rates this year, it still projected two rate hikes for later this year, which suggests one hike in June and then one at the end of the year after the election.
Don't Fear Consumer Debt
For decades, the issue of debt has often dominated discussions of economics. It’s especially true these days with a $19 trillion federal debt and the fact that home loans were at the heart of the Panic of 2008. Lately, some analysts have fretted about student loans and many think economic growth in this recovery has been driven by borrowing.
TARP Was a Mistake, Not a Success
Today marks the seventh anniversary of the market bottom in 2009. Government claims that the Troubled Asset Relief Program, TARP for short, has been a massive success, saving the economy and generating $65 billion in government profits in the process.
Beware Trade-Recession Scare Story
Friday’s robust report on job growth ought to put the nail in the coffin on recent fears about a recession. Payrolls rose 242,000 and civilian employment, an alternative measure of jobs that includes small business start-ups, increased 530,000. In the past year, these two measures are both up approximately 2.7 million. Obviously, we’re not in a recession.
The Healthcare Dichotomy
The issue of runaway healthcare costs has been at the forefront of American politics for over a decade. We have all heard horror stories from the insured and uninsured alike: $1000 visits to the emergency room, $3000 MRIs, even trips to the pediatrician can give us sticker shock these days. To make matters worse, the accelerating retirement of the baby boomers promises to continue, if not exacerbate, this trend.
With both the European Central Bank (ECB) and the Bank of Japan moving to a Negative Interest Rate Policy (NIRP), conventional wisdom says the US dollar will continue to strengthen. After all, the Fed is tightening while everyone else seems to be working overtime to ease policy.
No Sign of Recession in the Data
So far this year, the S&P 500 is down around 9% and has been down as much as 10.5%, a garden variety correction. But some pessimistic pundits, analysts, and investors are treating the correction as a harbinger of the recession they’ve predicted multiple times before, ever since the economy started to recover in mid-2009.
Want Faster Growth? Put the Jockey on a Diet!
The number one reason the US has a Plow Horse economy rather than a Race Horse economy is the growth in the size and scope of the federal government, which sits like a grossly overweight jockey atop an otherwise healthy thoroughbred.
Fed Not Going Away
Close your eyes (well, not literally). Imagine a huge manufacturing economy, in Asia, growing very rapidly. It became the second largest economy in the world, from ruin, in just a few short decades and produced 14% of global output. Now imagine it collapses.
Fed Waiting for More Information
After starting liftoff in December, no one really expected much out of today’s Fed meeting. And the Fed delivered exactly that, voting unanimously to do…nothing. But despite no action, their wording will get plenty of scrutiny.
Fear is Overbought
The stock market is not the economy, and the economy is not the stock market. Nonetheless, many are convinced that the market correction of the past few weeks is a certain sign of impending recession. Never mind that China just reported 6.9% real GDP growth. Never mind that a barrel of oil costs less than $30, which means consumers are saving hundreds of billions of dollars per year on top of what the drop in natural gas prices has saved them.
To paraphrase the late Jude Wanniski – the history of man is a battle between the creation of wealth and the redistribution of wealth. Jude was a Supply-Sider, which means an economist who believes that entrepreneurship and supply (not demand) drives economic growth.
We Remain Positive About 2016
The Arab Spring is turning into an Islamic Winter, with some added cold wind, reminiscent of the Cold War – as Russia and Iran are seemingly aligned against a US-backed Saudi Arabia and Turkey. The intricacies of the religious, political, military, and historical events taking place are enough to give any normal person a headache. “Outrageously unstable,” is an understatement. Millions of refugees are voting with their feet.
Greedy Innkeeper or Generous Capitalist?
The Bible story of the virgin birth is at the center of much of the holiday cheer this time of year. The book of Luke tells us that Mary and Joseph traveled to Bethlehem because Caesar Augustus decreed a census should be taken. Mary gave birth after arriving in Bethlehem and placed baby Jesus in a manger because there was “no room for them in the inn.”
The Fed Launches Rate Hikes
One small step for the Fed, one giant leap for the US economy. At long last, after seven years of near zero percent short-term interest rates, the Federal Reserve unanimously decided to raise rates by 0.25 percentage points, the first rate hike since 2006. The new range for the federal funds rate is 0.25% to 0.5%, 25 basis points above the prior range.
Panic, Punts and Reality
The biggest single college football play of 2015 happened in Ann Arbor, MI, on October 17th. The ball was at mid-field, it was fourth down with two yards to go and there were only 10 seconds left in the game. The Michigan Wolverines were beating the Michigan State Spartans, 23-21.
Respect the Auto Sales Surge
Cars and light trucks – SUVs, minivans, and pick-ups – have been a key bright spot in the economy the past few years, particularly with tepid growth in overall manufacturing caused by weak foreign economies and a stronger dollar. The pace seen in September, October, and November marks the first time in history that auto sales have exceeded an 18 million annual rate in three consecutive months.
Expect Strong Christmas Spending
We are watching Christmas season sales data very carefully, but we also warn investors that the early data are not very useful. No matter what initial readings show, the underlying fundamentals look relatively strong.
If the US were in the middle of an economic boom, like in the mid-1980s or late-1990s, it would be very easy to be thankful in the week ahead. Instead, a cornucopia of complaints seems to accompany what has been a plodding economic recovery, what we call the Plow Horse Economy.
The Worst Recovery Ever? For Part-Time Jobs
Mark Twain has been attributed with saying “If you don't read the newspaper, you're uninformed. If you read the newspaper, you're misinformed.” And given the media’s portrayal of the job market recovery over the past six-and-a-half years, we can see where he was coming from.
It's the Domestic Spending; Stupid
Washington DC is out of control. In Orwellian Newspeak, we hear liberals say tax cuts, “cost too much,” but deficit spending is an “investment.” If GOP politicians reduce spending growth from already inflated forecasts, they call it a “‘conservative’ spending cut.” And, politicians from both sides of the aisle pat themselves on the back for “working so hard” to reduce the deficit when it’s really the US taxpayer that provided the muscle. Surging tax receipts have lowered deficits in recent years, not fiscal discipline.
Higher Rates, Higher Stocks
What’s happened over the past few weeks is not supposed to happen, at least if you use traditional academic-style discount models to assess the stock market. Whether you prefer a dividend discount model or an earnings discount model, both say higher interest rates should reduce the value of equities.
Light This Candle
The US stock market reminds us of Alan Shepard in 1961. Exasperated by the long wait in his Mercury Spacecraft “Freedom 7” while NASA engineers fiddled, he said, “Why don’t you fix your little problem and light this candle?” They finally did and he became the first American to go into space.
Fed Sets Stage For December Rate Hike
Today’s statement from the Federal Reserve sets the stage for a December rate hike. The key issue is whether the next two reports on the labor market, the one coming out late next week and the one released in early December, show a reacceleration in jobs gains or continued drops in the unemployment rate. At present, we expect both, which suggests the Fed will start a long-awaited series of rate hikes in December.
The Labor Market Mystery
The most important economic report of the next couple of weeks is not the GDP report on Thursday, which, as we said last week, is likely to show mediocre real growth of 1.5%. Strip out inventories, trade, and government and “core” real GDP growth should be around 3.5%.
The Bull Market Still Lives
Stock market corrections (usually defined as 10% pullbacks) are hard to understand. Often they happen in the midst of long-term bull markets. But why? Is it like getting the flu? Is it just emotion? Or, are corrections a necessary cleansing out of excess optimism? Our answer: we don't really know.
Government Taxi Bubble Causes Credit Union Failure
Since the financial crisis, we have been inundated with the idea that the private sector is to blame for the misery that has befallen the American public. Countless politicians have appeared on TV or hit the campaign trail and the message is always the same; greed caused the great recession and the only solution is to trust the government more. Very seldom do we hear that government might have helped cause the housing bubble and the bank failures that resulted.
The Uber-Dove vs Black Swans
You couldn’t have missed it. Only stages full of GOP presidential candidates or the Super Bowl have ever had more media attention. Yes, we are talking about the Federal Reserve’s thundering announcement on Thursday – of nothing. The Fed decided to keep interest rates at zero, for at least the next few months, after holding them near zero for over six years.
It is long past time for the Federal Reserve to start raising short-term rates. The unemployment rate is already very close to the Fed’s (new, lower) long-term projection of 4.9% and set to fall further in the next year, even if the Fed had already started lifting rates. Nominal GDP growth – real GDP growth plus inflation – is up at a 4.1% annual rate in the past two years, slightly exceeding the Fed’s long-run projection of 4% growth.
The Fed: More Noise Than Meaning
Get on with it already! Don’t get us wrong, we know this is the “Super Bowl” for business journalism (anyone have tix to the ESPN party?), but raising rates from 1/8th to 3/8ths of 1%, after six years of economic recovery should be a no-brainer. Our suggestion: spend the week analyzing companies and investment products. Don’t get sucked into the idea that there is some genius trading strategy for how to deal with this. That’s right; ignore it. Don’t read the statement and don’t watch the press conference.
Everything's Not Bad
Have you noticed? Everything’s bad these days. On February 25, 2015, the Washington Post wonkblog posted a piece titled “Why rising wages might be bad news.” Last week, on September 1st, after another strong month of car and truck sales, the Wall Street Journal published a story “The Bad News in Strong Car Sales.”
This Correction is Technical, Not Fundamental
The only people more giddy with anticipation are the stock market pundits looking for The Big Short – II. It’s an eagerly anticipated sequel of the Panic of 2008. The S&P 500 is tumbling again today, more than 10% below the peak in May.
Financial System Healing
Every month, the National Association of Realtors reports on existing home sales, which are closings on previously-owned homes. These sales have been doing very well lately, up in four of the past five months and up almost 10% from a year ago. We expect further gains when the next report comes out Thursday morning.
Even Garth Can't Argue About Liftoff
Plow On, Garth! Time for Liftoff, Wayne! The first report on Q2 real GDP showed Plow Horse annualized growth of 2.3%, exactly the same as the average growth rate in the past year. Now that’s the definition of a Plow Horse report.
GDP Rebounds in Q2
The US economy rebounded in the second quarter from the supposed decline in real GDP in Q1. We say “supposed decline” in Q1 because the government has had persistent problems seasonally adjusting GDP, tending to underestimate growth in the first quarter each year while overestimating growth in the middle two quarters.
Politicians Should Stop Giving Investment Advice
For the past six years, the conventional wisdom has predicted the end of the world. On the left, they say “Tea Party austerity” is a catastrophe and an “income divide” spells doom. On the right, the election of President Obama made collapse inevitable. Anything and everything that could be spun negatively, has been.
Stocks Are Still Cheap
You know those TV shows – the ones about ice trucking, fishing in Alaska, or digging for gold. They’re made to bring out these interesting jobs, but also the danger. They leave you hanging, and break for commercial, just when the truck starts to slide on a bridge, or just when a huge wave is approaching.
Fed Will Kick The Can, But Shouldn't
Wednesday – the day people have been talking about for months – is fast approaching. The Federal Reserve will announce its policy decision on Wednesday and futures markets don’t expect any change. Nonetheless, that’s a forecast of what the Fed will do, not what it should do. We think the US economy is long past the point where short-term interest rates should be held at zero.
Don't Deny The Jobs Recovery
You would think that after 63 straight months of growth in private sector payrolls, the longest streak since the 1930s, everyone would agree that the job-market recovery is for real. But, that ain’t the case. A quick Google search still uncovers a whole bunch of pessimistic appraisals of jobs and the economy.
Inflation: Dormant, Not Dead
Last month we explained why the dreaded threat of hyperinflation hasn’t materialized, and likely wouldn’t materialize, in spite of the huge expansion of the Federal Reserve’s balance sheet the past several years, including QE1, 2, and 3.
Results 301–350 of 377 found.